Financial Model - Colgate Palmolive (solved)
Prepared by Dheeraj Vaidya, CFA, FRM
[email protected]Table of Contents
Income Statements
Balance Sheet
Cash Flows
Depreciation Schedule
Amortization Schedule
Working Capital Schedule
Other Long Term Schedule
Shareholder's Equity Schedule
Shares Outstanding Schedule
Debt Schedule
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Colgate-Palmolive Company
Income Statement (Consolidated)
($ in Million Except Per Share Amounts) Dec-10 Dec-11
Net sales 15,564 16,734
Cost of sales 6,360 7,144
Gross profit 9,204 9,590
Selling, general and administrative expenses 5,414 5,758
Other (income) expense, net 301 (9)
EBIT 3,489 3,841
Interest expense, net 59 52
EBT 3,430 3,789
Provision for income taxes 1,117 1,235
Net income including noncontrolling interests 2,313 2,554
Less: Net income attributable to noncontrolling interests 110 123
Net income attributable to Colgate-Palmolive Company 2,203 2,431
Earnings per common share, basic 2.23 2.49
Earnings per common share, diluted 2.16 2.47
Basic Weighted Average Shares 976.7
Diluted Weighted Average Shares 984.1
EBITDA
Vertical Analysis Dec-10 Dec-11
Net sales 100.0% 100.0%
Cost of sales 40.9% 42.7%
Gross profit 59.1% 57.3%
Selling, general and administrative expenses 34.8% 34.4%
Other (income) expense, net 1.9% -0.1%
Operating profit 22.4% 23.0%
Interest expense, net 0.4% 0.3%
Income before income taxes 22.0% 22.6%
Provision for income taxes 7.2% 7.4%
Net income including noncontrolling interests 14.9% 15.3%
Less: Net income attributable to noncontrolling interests (% o 4.8% 4.8%
Net income attributable to Colgate-Palmolive Company 14.2% 14.5%
Effective Tax Rates 32.6% 32.6%
Horizontal Analysis Dec-10 Dec-11
Net sales 1.5% 7.5%
Cost of sales 0.6% 12.3%
Gross profit 2.2% 4.2%
Selling, general and administrative expenses 2.5% 6.4%
Other (income) expense, net 171.2% -103.0%
Operating profit -3.5% 10.1%
Interest expense, net -23.4% -11.9%
Income before income taxes -3.1% 10.5%
Provision for income taxes -2.1% 10.6%
Net income including noncontrolling interests -3.5% 10.4%
Less: Net income attributable to noncontrolling interests 3.8% 11.8%
Net income attributable to Colgate-Palmolive Company -3.8% 10.3%
Segmental Information
Dec-10 Dec-11
Oral, Personal and Home Care
North America $ 2,878
% growth (yoy)
Latin America 4,895
% growth (yoy)
Europe/South Pacific 3,508
% growth (yoy)
Asia 2,074
% growth (yoy)
Africa/Eurasia 1,207
% growth (yoy)
Total Oral, Personal and Home Care 14,562
Pet Nutrition 2,172
% growth (yoy)
Total Net sales $ 16,734
Modeling Revenues and Costs
Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18
17,085 17,420 $ 17,780 $ 18,146 $ 18,521 $ 18,903 $ 19,294
7,153 7,219 7,379 7,531 7,686 7,845 8,007
9,932 10,201 10,401 10,616 10,835 11,058 11,287
5,930 6,223 6,223 6,351 6,482 6,616 6,753
113 422 444 454 463 473 482
3,889 3,556 3,734 3,811 3,889 3,970 4,052
15 (9) (83) (83) (80) (89) (87)
3,874 3,565 3,816 3,894 3,970 4,059 4,138
1,243 1,155 1,240 1,265 1,290 1,319 1,345
2,631 2,410 2,576 2,628 2,679 2,740 2,793
159 169 180 184 188 192 196
2,472 2,241 2,396 2,444 2,492 2,548 2,598
2.60 2.41 2.62 2.76 2.91 3.07 3.22
2.57 2.38 2.61 2.71 2.85 3.01 3.17
952.1 930.8 913.8 884.7 857.0 830.8 805.9
960.2 939.9 918.9 901.3 872.9 845.9 820.4
4,179 4,290 4,404 4,520 4,639
Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18
100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
41.9% 41.4% 41.5% 41.5% 41.5% 41.5% 41.5%
58.1% 58.6% 58.5% 58.5% 58.5% 58.5% 58.5%
34.7% 35.7% 35% 35% 35% 35% 35%
0.7% 2.4% 2.5% 2.5% 2.5% 2.5% 2.5%
22.8% 20.4% 21.0% 21.0% 21.0% 21.0% 21.0%
0.1% -0.1%
22.7% 20.5% 21.5% 21.5% 21.4% 21.5% 21.4%
7.3% 6.6% 7.0% 7.0% 7.0% 7.0% 7.0%
15.4% 13.8% 14.5% 14.5% 14.5% 14.5% 14.5%
6.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0%
14.5% 12.9% 13.5% 13.5% 13.5% 13.5% 13.5%
32.1% 32.4% 32.5% 32.5% 32.5% 32.5% 32.5%
Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18
2.1% 2.0% 2.1% 2.1% 2.1% 2.1% 2.1%
0.1% 0.9% 2.2% 2.1% 2.1% 2.1% 2.1%
3.6% 2.7% 2.0% 2.1% 2.1% 2.1% 2.1%
3.0% 4.9% 0.0% 2.1% 2.1% 2.1% 2.1%
-1355.6% 273.5% 5.3% 2.1% 2.1% 2.1% 2.1%
1.2% -8.6% 5.0% 2.1% 2.1% 2.1% 2.1%
-71.2% -160.0% 818.0% 0.4% -3.4% 11.1% -2.8%
2.2% -8.0% 7.0% 2.0% 1.9% 2.2% 2.0%
0.6% -7.1% 7.4% 2.0% 1.9% 2.2% 2.0%
3.0% -8.4% 6.9% 2.0% 1.9% 2.2% 2.0%
29.3% 6.3% 6.7% 2.0% 1.9% 2.2% 2.0%
1.7% -9.3% 6.9% 2.0% 1.9% 2.2% 2.0%
Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18
$ 2,971 $ 3,072 3,195 3,323 3,456 3,594 3,738
3.2% 3.4% 4.0% 4.0% 4.0% 4.0% 4.0%
5,032 5,012 5,062 5,113 5,164 5,216 5,268
2.8% -0.4% 1.0% 1.0% 1.0% 1.0% 1.0%
3,417 3,396 3,430 3,464 3,499 3,534 3,569
-2.6% -0.6% 1.0% 1.0% 1.0% 1.0% 1.0%
2,264 2,472 2,719 2,991 3,290 3,619 3,981
9.2% 9.2% 10.0% 10.0% 10.0% 10.0% 10.0%
1,241 1,257 1,276 1,295 1,314 1,334 1,354
2.8% 1.3% 1.5% 1.5% 1.5% 1.5% 1.5%
14,925 15,209 15,513 15,824 16,140 16,463 16,792
2.5% 1.9% 2.0% 2.0% 2.0% 2.0% 2.0%
2,160 2,211 2,266 2,323 2,381 2,441 2,502
-0.6% 2.4% 2.5% 2.5% 2.5% 2.5% 2.5%
$ 17,085 $ 17,420 $ 17,780 $ 18,146 $ 18,521 $ 18,903 $ 19,294
Colgate-Palmolive Company
Consolidated Balance Sheets
Dec-10 Dec-11 Dec-12 Dec-13
Assets
Current Assets
Cash and cash equivalents 490 878 884 962
Receivables 1,610 1,675 1,668 1,636
Inventories 1,222 1,327 1,365 1,425
Other current assets 408 522 639 799
Total current assets 3,730 4,402 4,556 4,822
Property, plant and equipment, net 3,693 3,668 3,842 4,083
Total assets 11,172 12,724 13,394 13,876
Liabilities and Shareholders' Equity
Current Liabilities
Total current liabilities 3,728 3,716 3,736 4,470
Revolver
Long-term debt 2,815 4,430 4,926 4,749
Deferred income taxes 108 252 293 444
Other liabilities 1,704 1,785 2,049 1,677
Total liabilities 8,355 10,183 11,004 11,340
Commitments and contingent liabilities - -
Shareholders'
TotalEquity
Colgate-Palmolive
Company shareholders'
equity 2,675 2,375 2,189 2,305
Noncontrolling interests 142 166 201 231
Total shareholders' equity 2,817 2,541 2,390 2,536
Total liabilities and
shareholders' equity 11,172 12,724 13,394 13,876
Check
Dec-14 Dec-15 Dec-16 Dec-17 Dec-18
514 500 500 500 500
1,705 1,740 1,776 1,813 1,850
1,415 1,444 1,474 1,505 1,536
800 817 833 851 868
4,434 4,501 4,584 4,668 4,754
4,378 4,654 4,909 5,143 5,357
13,754 14,067 14,376 14,666 14,937
4,067 3,911 4,395 4,503 4,587
- 940 1,619 2,658 3,681
4,258 4,003 3,339 2,644 1,944
444 444 444 444 444
1,677 1,677 1,677 1,677 1,677
10,446 10,975 11,475 11,926 12,333
2,897 2,497 2,119 1,765 1,434
411 595 783 975 1,170
3,309 3,093 2,902 2,740 2,604
13,754 14,067 14,376 14,666 14,937
- - - 0 0
Colgate-Palmolive Company
Consolidated Cash Flows
### Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18
Operating Activities
Net income including noncontrolling interests $ 2,313 $ 2,554 $ 2,631 $ 2,410 $ 2,576 $ 2,628 $ 2,679 $ 2,740 $ 2,793
Adjustments to reconcile net income
Depreciation and amortization 376 421 425 439 445 479 515 550 587
Receivables 40 (130) 19 (37) (69) (35) (36) (37) (37)
Inventories (10) (130) (21) (97) 10 (29) (30) (30) (31)
Accounts payable and other accruals (65) 199 (5) 24 (19) 75 70 71 73
Other non-current assets and liabilities 135 54 30 13 18 (11) (11) (12) (12)
Net cash provided by operations 3,211 2,896 3,196 3,204 2,962 3,107 3,187 3,283 3,373
Investing Activities
Capital expenditures (550) (537) (565) (670) (711) (726) (741) (756) (772)
Net cash used in investing activities (658) (1,213) (865) (890) (711) (726) (741) (756) (772)
Cash Flow for Financing Activities 2,553 1,683 2,331 2,314 2,251 2,382 2,446 2,526 2,601
Financing Activities
Principal payments on debt (4,719) (4,429) (5,011) (7,554) (895) (491) (255) (664) (695)
Proceeds from issuance of debt 5,015 5,843 5,452 7,976
Revolver 0 940 680 1,039 1,023
Dividends paid (1,142) (1,203) (1,277) (1,382) (1,318) (1,344) (1,371) (1,401) (1,429)
Purchases of treasury shares (2,020) (1,806) (1,943) (1,521) (1,500) (1,500) (1,500) (1,500) (1,500)
Proceeds from exercise of stock options and excess tax benefits 242 353 478 339 1,014.3 - - - -
Net cash used in financing activities (2,624) (1,242) (2,301) (2,142) (2,698) (2,396) (2,446) (2,526) (2,601)
Effect of exchange rate changes on Cash and cash equivalents (39) (53) (24) (94)
Net increase (decrease) in Cash and cash equivalents (110) 388 6 78 (448) (14) 0 0 0
Cash and cash equivalents at beginning of year 600 490 878 884 962 514 500 500 500
Cash and cash equivalents at end of year $ 490 $ 878 $ 884 $ 962 $ 514 $ 500 $ 500 $ 500 $ 500
Supplemental Cash Flow Information
Income taxes paid $ 1,123 $ 1,007 $ 1,280 $ 1,087
Interest paid 70 58 77 118
Colgate-Palmolive Company
Consolidated Depreciation and Capex
Dec-07 Dec-08 Dec-09 Dec-10 Dec-11
Net Sales 13,790 15,330 15,327 15,564 16,734
Capital Expenditures 550 537
Capital Expenditures as % of Net Sales 3.5% 3.2%
Beginning Net PP&E
Capital Expenditures
(Depreciation Expense)
Ending Net PP&E 3,015 3,119 3,516 3,693 3,668
Total Depreciation Expense
Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18
17,085 17,420 17,780 18,146 18,521 18,903 19,294
565 670 711 726 741 756 772
3.3% 3.8% 4.0% 4.0% 4.0% 4.0% 4.0%
4,083.0 4,378.1 4,653.5 4,908.8 5,143.5
711.2 725.9 740.8 756.1 771.7
(416.0) (450.5) (485.6) (521.4) (558.0)
3,842 4,083 4,378.1 4,653.5 4,908.8 5,143.5 5,357.2
416.0 450.5 485.6 521.4 558.0
Colgate-Palmolive Company
Consolidated Amortization & Intangible
Dec-07 Dec-08 Dec-09 Dec-10 Dec-11
Net Sales 13,790 15,330 15,327 15,564 16,734
Additions to Intangibles
Additions to Intangibles as % of Net Sales
Beginning Net Intangibles
Additions to Intangibles
(Amortization Expense)
(Intangible Sales and write offs)
Ending Net Intangibles
Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18
17,085 17,420 17,780 18,146 18,521 18,903 19,294
1,496.0 1,467.0 1,438.0 1,409.0 1,380.0
- - - - -
(29.0) (29.0) (29.0) (29.0) (29.0)
1,496.0 1,467.0 1,438.0 1,409.0 1,380.0 1,351.0
Colgate-Palmolive Company
Consolidated Working Capital
Dec-09 Dec-10 Dec-11
Net Sales 15,327 15,564 16,734
Cost of Sales 6,319 6,360 7,144
Working Capital Balances
Receivables 1,626 1,610 1,675
Inventories 1,209 1,222 1,327
Other current assets 375 408 522
Total Non Cash Current Assets 3,210 3,240 3,524
Accounts payable 1,172 1,165 1,244
Accrued income taxes 387 272 392
Other accruals 1,679 1,682 1,700
Total Non-Debt Current Liabilities 3,238 3,119 3,336
Net Working Capital/ (Deficit) (28) 121 188
(Increase)/ Decrease in Working Capital 429 (149) (67)
Purchases 6,331 6,373 7,249
Ratios & Assumptions
Accounts Receivable, net (Collection period in days) 39 38 37
Inventory (Days outstanding) 70 70 68
Other Current Assets (% of Net Sales) 2.4% 2.6% 3.1%
Accounts Payable (Days Payable) 68 67 63
Accrued Income Taxes (% of COGS) 6.1% 4.3% 5.5%
Other accruals (% of COGS) 26.6% 26.4% 23.8%
Cash Flow from Individual line items
Receivables (net of allowances of $49, $53, $52, $47 (34) 16 (65)
Inventories (12) (13) (105)
Other current assets (9) (33) (114)
Accounts payable 111 (7) 79
Accrued income taxes 115 (115) 120
Other accruals 258 3 18
(Incease)/ Decrease in Working Capital 429 (149) (67)
Check
Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18
17,085 17,420 17,780 18,146 18,521 18,903 19,294
7,153 7,219 7,379 7,531 7,686 7,845 8,007
1,668 1,636 1,705 1,740 1,776 1,813 1,850
1,365 1,425 1,415 1,444 1,474 1,505 1,536
639 799 800 817 833 851 868
3,672 3,860 3,920 4,001 4,084 4,168 4,254
1,290 1,343 1,312 1,346 1,374 1,402 1,431
254 239 258 264 269 275 280
1,888 1,980 1,992 2,033 2,075 2,118 2,162
3,432 3,562 3,563 3,643 3,718 3,795 3,874
240 298 357 358 365 373 380
(52) (58) (59) (0) (7) (8) (8)
7,191 7,279 7,369 7,560 7,716 7,875 8,038
36 34 35 35 35 35 35
70 72 70 70 70 70 70
3.7% 4.6% 4.5% 4.5% 4.5% 4.5% 4.5%
65 67 65 65 65 65 65
3.6% 3.3% 3.5% 3.5% 3.5% 3.5% 3.5%
26.4% 27.4% 27.0% 27.0% 27.0% 27.0% 27.0%
7 32 (69) (35) (36) (37) (37)
(38) (60) 10 (29) (30) (30) (31)
(117) (160) (1) (17) (17) (17) (18)
46 53 (31) 34 28 28 29
(138) (15) 19 5 5 6 6
188 92 12 41 42 43 44
(52) (58) (59) (0) (7) (8) (8)
Number of 365
Colgate-Palmolive Company
Other Long Term Asset Liability Schedule
Dec-10 Dec-11 Dec-12 Dec-13
Assets
Deferred income taxes 84.0 115.0 92.0 77.0
Other assets 472.0 541.0 905.0 924.0
Liability
Deferred income taxes 108.0 252.0 293.0 444.0
Other liabilities 1,704.0 1,785.0 2,049.0 1,677.0
Dec-14 Dec-15 Dec-16 Dec-17 Dec-18
77.0 77.0 77.0 77.0 77.0
924.0 924.0 924.0 924.0 924.0
444.0 444.0 444.0 444.0 444.0
1,677.0 1,677.0 1,677.0 1,677.0 1,677.0
Colgate-Palmolive Company
Consolidated Shareholder's Equity
Dec-10 Dec-11 Dec-12 Dec-13
Beginning Equity Balance
Net Income
Issuance/ (Repurchase) of Equity
Dividends Paid
Option Proceeds
Ending Equity Balance 2,675 2,375 2,189 2,305
Share Repurchase Assumptions
Current Year EPS 2.16 2.47 2.57 2.38
Assumed Current Year EPS Multiple 17.1x 19.5x 25.0x
Implied Share Price 42 50 59
Shares Repurchased - millions 42.642 38.731 25.573
Amount Repurchased ( $ outgo) 2,020 1,806 1,943 1,521
New Shares from Exercised Options
New Shares from Exercised Options - millions 11.5 12.2 7.9
Average Strike Price 30.6 39.1 43.0
Option Proceeds 242 353 478 339
Restricted Stock Units (RSUs) 1.46 2.21 1.91
Dividend Assumptions
Total Dividends Paid 1,203.0 1,277.0 1,382.0
Net Income 2,431 2,472 2,241
Dividend Payout Ratio 49.5% 51.7% 61.7%
Shares and ESOPs
Balance, January 1, 2011
Common stock acquired
Shares issued for stock options
Shares issued for restricted stock units and other
Balance, December 31, 2011
Common stock acquired
Shares issued for stock options
Shares issued for restricted stock units and other
Balance, December 31, 2012
Common stock acquired
Shares issued for stock options
Shares issued for restricted stock units and other
Balance, December 31, 2013
Dec-14 Dec-15 Dec-16 Dec-17 Dec-18
2,305 2,897 2,497 2,119 1,765
2,396 2,444 2,492 2,548 2,598
(1,500) (1,500) (1,500) (1,500) (1,500)
(1,318) (1,344) (1,371) (1,401) (1,429)
1,014 - - - -
2,897 2,497 2,119 1,765 1,434
2.61 2.71 2.85 3.01 3.17
19.0x 19.0x 19.0x 19.0x 19.0x
50 52 54 57 60
30.283 29.111 27.654 26.212 24.932
1,500 1,500 1,500 1,500 1,500
24.2
42.0
1,014.3
2.06 2.06 2.00 2.00 2.00
1,318 1,344 1,371 1,401 1,429
2,396 2,444 2,492 2,548 2,598
55.0% 55.0% 55.0% 55.0% 55.0%
Colgate-Palmolive Company
Consolidated Shares Outstanding
Dec-10 Dec-11 Dec-12 Dec-13
Beginning Balance - Basic (actual) 989.7 960.0 935.7
Shares Issued (actual realization of options) 13.0 14.4 9.8
Shares Repurchased (42.6) (38.7) (25.6)
Ending Balance - Basic (actual) 989.7 960.0 935.7 919.9
Basic Weighted Average Shares 976.7 952.1 930.8
Effects of Options & Restricted Stock Units 7.4 8.1 9.1
Diluted Weighted Average Shares 984.1 960.2 939.9
Dec-14 Dec-15 Dec-16 Dec-17 Dec-18
919.9 913.8 884.7 857.0 830.8
24.2
(30.3) (29.1) (27.7) (26.2) (24.9)
913.8 884.7 857.0 830.8 805.9
916.9 899.3 870.9 843.9 818.4
2.1 2.1 2.0 2.0 2.0
918.9 901.3 872.9 845.9 820.4
Colgate-Palmolive Company
Debt Schedule
Dec-10 Dec-11 Dec-12 Dec-13 Dec-14
Cash Flow Available for Financing Activities 2,250.5
Proceeds from/ (Repurchase of) Equity (1,500.0)
Dividends (1,317.6)
Option Proceeds 1,014.3
+ Beginning Cash Balance 962.0
- Minimum Cash Balance (500.0)
Cash Available for Debt Repayment 909.2
Long Term Debt Issuance -
Long Term Debt (Repayments) (895.0)
Cash Available for Revolving Credit Facility 14.2
Revolving Credit Facility
Beginning Balance -
Discretionary (Paydown)/ Borrowings -
Ending Balance - -
Long Term Debt
Beginning Balance 5,644.0
Issuance
(Repayment/ Amortization) (895.0)
Ending Balance 5,644.0 4,749.0
Long Term Debt 4,258.0
Current Portion of Long Term Debt 491.0
Revolving Credit Facility Average Balance -
Interest Rate 1.5%
Interest Expense -
Long Term Debt Average Balance 5,196.5
Interest Rate 1.7%
Interest Expense 90.0
Total Interest Expense 90.00
Cash Balances Average Balance 738.1
Interest Rate 1.00%
Interest Income 7.38
Dec-15 Dec-16 Dec-17 Dec-18
2,381.5 2,445.9 2,526.5 2,600.9
(1,500.0) (1,500.0) (1,500.0) (1,500.0)
(1,344.4) (1,370.6) (1,401.3) (1,428.8)
- - - -
514.2 500.0 500.0 500.0
(500.0) (500.0) (500.0) (500.0)
(448.6) (424.7) (374.9) (327.9)
- - - -
(491.0) (255.0) (664.0) (695.0)
(939.6) (679.7) (1,038.9) (1,022.9)
- 939.6 1,619.3 2,658.2
939.6 679.7 1,038.9 1,022.9
939.6 1,619.3 2,658.2 3,681.1
4,749.0 4,258.0 4,003.0 3,339.0
(491.0) (255.0) (664.0) (695.0) (700.0)
4,258.0 4,003.0 3,339.0 2,644.0
4,003.0 3,339.0 2,644.0 1,944.0
255.0 664.0 695.0 700.0
469.8 1,279.5 2,138.8 3,169.7
1.5% 1.5% 1.5% 1.5%
7.0 19.2 32.1 47.5
4,503.5 4,130.5 3,671.0 2,991.5
1.8% 1.6% 1.7% 1.5%
81.0 66.0 62.0 44.0
88.05 85.19 94.08 91.54
507.1 500.0 500.0 500.0
1.00% 1.00% 1.00% 1.00%
5.07 5.00 5.00 5.00
